QE or Austerity? Is there a 3rd Alternative?

Posted Nov 15, 2013 by Martin Armstrong

QUESTION:

In your writings you seem to be both against QE and against Austerity. What then is the third way? How do we get out of this high debt, high deficit, low growth cycle without using either of these methods or a collapse and reboot?

On a side note I was curious if you were familiar with … and his work on predicting bubbles and possibly altering their course and what what you thought of it?

Sincerely,

Anonymous

ANSWER: Neither QE nor austerity will get us out of the crisis. We are preparing the Solution. There is the Sovereign Debt Crisis conference we held in Philadelphia that a DVD is available. This cannot be solved by either tool. We need a debt restructuring on a major scale – a structured bankruptcy.

I do not like really to comment on other people’s work. Suffice it to say, the approach is too domestic and assumes bubbles are created internally when in fact they are the product of international capital inflows. The person you mention predicted a bubble as of May 2013. I think he is off on that one as evidenced by the market. Bubbles require a spike high like you see in 1929, 2000, or Tokyo 1989. Without that Phase-Transition spike high, there can be no bubble.